On October 24, 2012, Canada's Department of Finance
(Finance) released a Notice of Ways and Means Motion (NWMM). This
"comprehensive package of technical income tax
legislation" implements a variety of outstanding technical tax
amendments, including legislative proposals relating to the
taxation of Canadian multinational corporations with foreign
affiliates. In many ways the NWMM is the culmination of legislative
developments that started almost ten years ago.
On December 20, 2002, Finance released almost 40 amendments to
the Canadian foreign affiliate and foreign accrual property income
regime. Unfortunately, the legislative package that followed on
February 27, 2004, to address the anomalies and issues in the 2002
proposals only created even more anomalies and issues.
The 2004 draft rules were overhauled and replaced with a third
set of draft proposals released on December 18, 2009, some of which
were refined by draft legislation issued on August 27, 2010. The
fifth release – on August 19, 20111, modified
certain areas of the 2004 draft legislation that had not been
addressed in the 2010 proposals and introduced new proposals (such
as the upstream loan rules).
The October 24, 2012, NWMM consolidates and amends many of these
foreign affiliate proposals introduced in the last few years. Given
that these proposals have been released as a NWMM, final foreign
affiliate legislation can now be expected sometime in 2012 or 2013,
which would provide taxpayers and their advisers some stability in
this area for the first time in a decade.
Summary of measures
The more significant amendments in the NWMM include technical
amendments relating to:
the taxation of Canadian multinational corporations with
foreign affiliates, in accordance with proposals released on
December 18, 2009, and August 19, 2011;
2010 federal budget proposals (released for comment on May 7,
2010, and August 27, 2010) with respect to:
the taxation of non-resident trusts and their beneficiaries,
and of Canadian taxpayers who hold interests in offshore investment
specified leasing property;
conversions of specified investment flow-through trusts and
partnerships into corporations;
foreign tax credit generators; and
a regime for information reporting of tax avoidance
various measures that were released on July 16, 2010, November
5, 2010, and October 31, 2011;
the Apprenticeship Completion Grant (announced on January 27,
the Atlantic investment tax credit (released on May 3,
Employment Insurance for the self-employed (released on August
real estate investment trusts (released on December 16,
the deductibility of contingent amounts, withholding tax
applicable to certain interest payments made to non-residents, and
certain life insurance corporation reserves (released on March 16,
labour-sponsored venture capital corporations;
the allocation, among provinces and territories, of the taxable
income of airline corporations; and
the Excise Tax Act, including Goods and Services Tax
and the Harmonized Sales Tax (GST/HST) relief on the administrative
service of collecting and distributing the levy on blank media
imposed under the Copyright Act, announced on October 31,
1. The August 19, 2011, package of legislative proposals
is discussed in our Tax memo "Long-awaited foreign
affiliate amendments released" at
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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